Image source: Unilever plc
How have Unilever (LSE: ULVR) shares fared since the demerger of the ice cream part of its business? The newly created Magnum Ice Cream Company (LSE: MICC) was spun out in December 2025, existing shareholders receiving one Magnum share for each five held in the consumer goods giant.
The result? Business as usual, for the most part. Unilever shares are up 3% – lagging the FTSE 100, which is up 5% over the same timeframe.
The Magnum Ice Cream Company (listed in Amsterdam but with secondary listings on the London Stock Exchange and in New York) is beating it handily after a recent surge – up approximately 13%.
Does this signal that the demerger was a good move for the ice cream brand? Is this a golden opportunity to pick up shares in the newly formed business? Let’s explore.
Icey stuff
On the surface, Magnum Ice Cream has one of the most prized characteristics of any business – a wide economic moat. Its headline brand of Magnum is joined by other sunny day big hitters like Cornetto, Ben & Jerry’s and Walls. These are the kind of brands that many folks don’t like replacing with cheap knockoffs.
Such a terrific competitive advantage would normally be enough for me to research a stock in detail. But the effects of inflation give me pause for thought. Chocolate is one of the worst culprits in the current inflation crisis (along with coffee and beef).
The worsening farming yields (which many put down to climate change) combined with increasing demands in developing countries, have pushed the price of chocolate up. It’s resulted in such issues as Toffee Crisps and Blue Ribands not being labelled as chocolate anymore because the new recipes don’t have enough of the brown stuff in them.
Because I see a possibility for this trend to continue, I won’t be exploring this as a stock to buy at present.
Cost of living
How about Unilever then? The £104bn market cap group boasts many household names. Indeed, the firm builds its business around the ‘Power Brands’ – its own title for names like Dove, Hellmann’s and Vaseline, the core pillars of the company’s operations.
It’s hard not to ignore the twin threats of a cost-of-living crisis and high inflation here too. As consumer wallets are getting more and more stretched, the Unilever share price has been struggling. It’s roughly level with its value five years ago while the FTSE 100 is up 51%. This suggests the pricing power of those Power Brands isn’t quite strong enough to keep shoppers from opting for supermarket own brands.
It’s true that a stagnating share price can be a chance to buy on the cheap. Looking at the valuation though, a price-to-earnings ratio of 22 doesn’t exactly look like bargain territory to me. So while I accept there’s plenty of scope for a turnaround here, I’ll be focusing on the many other opportunities on the market in 2026.
This story originally appeared on Motley Fool
